Tuesday, December 21, 2010

A Debate About Polanyi and Exchange

Dan Hirschman responds to my invitation to post his comments on my Blog Post (below) and his response is posted in full:

Thank you for your comments and your criticism! I will respond in this comment and think more carefully about those issues I don't address.

First, I want to assert (to make sure I am correct) that you are not criticizing Polanyi's reading of the hidden/invisible hand. You and Polanyi agree that this metaphor was "exaggerated out of all proportion". You and Polanyi and Emma Rothchild also all agree that "Adam Smith wished to discourage the idea that the self-interest of the merchant naturally benefited the community." Am I correct in both those assertions?

Second, I am in no position to evaluate Polanyi's claims about primitive and archaic societies. I will note that Polanyi was writing primarily in the 1940s and 1950s, and the text you cited was from the 1990s. So, are you criticizing Polanyi for being wrong now or saying that he should have known even 50 years ago that he was wrong? Perhaps this difference does not matter, but I would like to clarify.

Third, while I am not in a position to evaluate the secondary literature on Polanyi's claims about primitive and archaic economies, I will point to one source that attempts to do just that and comes out much more sympathetic to Polanyi than your quick dismissal here. Gareth Dale has just published a highly-regarded book on Polanyi and his legacy, Karl Polanyi: The Limits of the Market. In Chapter 4, on "Trade, markets and money in archaic societies" (esp. 185-187), Dale tackels this question directly. I have not read the section thoroughly, but the conclusion presents a much more balanced take on Polanyi's insights into archaic societies noting that many of his critics misread his position. For example, you cite the existence of money in ancient Rome as evidence of the existence of markets. Polanyi asserted that markets existed and played a substantial role in archaic (though not tribal, I believe) economies, but they were not the primary form of integration. The mere existence of markets is part of Polanyi's understanding, not a datapoint in counter to it. The question is, what sort of markets were they? Fixed price, or supply-demand-price markets? Markets for land and labor and food or luxuries? Etc. Again, I cannot speak to the recent historical work on ancient civilizations, but I want to note that it is easy to read Polanyi's claims as being more absolute than they are.

Fourth, following from point three, Polanyi asserts that Smith is wrong about "TBE", that most people in most times and places have not engaged in much trucking, bartering and exchanging, and especially not over the most important goods (labor and land). Again, I am no expert in the history of markets and exchange! But, for Polanyi's theoretical claim about human nature (or the lack thereof) to hold, whether or not "TBE" exists in Rome is not entirely crucial. The important thing is that there exist some substantial number of societies in which these activities are not found. I think the case for the absence of truck, barter and exchange is more compelling for "tribal" rather than "archaic" societies (to use Polanyi's terms). For an interesting take on the history of the encounter between economic and anthropological thought, I recommend Heath Pearson's (2000) "Homo Economicus Goes Native" in History of Political Economy. I would be very curious as to your take on whether or not Smith believed that "truck, barter, and exchange" was part of human nature, and if so what that meant for Smith (since you assert, and I am readily willing to accept, that Smith's understanding of exchange was complex).

Fifth, I believe I agree with you that Smith was much more interested in saving the Indians from the horrors of the EIC than Polanyi notes in that brief (and, to reiterate, not intended for publication) passage. Beyond that, I do not have a strong sense of the whole of Smith's take on the EIC, and I very much defer to your reading!

Sixth, and last, I am curious as to your thoughts on Rothschild's work on the invisible hand. Here you suggest that she "still misreads" the role of the metaphor. Which "more striking and interesting" metaphor are you referring to? Overall, what is your take on Rothschild's Economic Sentiments, and her assertions re: how Smith's legacy was perverted into the employer's creed?

Many thanks Dan for your comments and questions. You address the issues clearly and I shall attempt later today to explain my criticism of Polanyi and where I agree/disagree with Emma Rothschild (her Economic Sentiments is a brilliant book). Meanwhile, I am grading MSc exams at present (a relic of my old day job) and must finish before Christmas. Some hope ...
Best regards, Gavin

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